Total Indian banking sector assets reached US$ 1.5 trillion in FY 12 from US$ 1.3 trillion in FY 10, with 73 per cent of it being accounted by the public sector. Total lending and deposits increased at a compound annual growth rate (CAGR) of 22.8 per cent and 21.2 per cent, respectively, during FY 06–13 and are further poised for growth, backed by demand for housing and personal finance. With the help of the Financial Inclusion Plan (FY 10–13), the banking connectivity in India increased more than threefold to 211,234 villages in 2013 from 67,694, at the beginning of the plan period.
Credit off-take has been surging ahead over the past decade, aided by strong economic growth, rising disposable incomes, increasing consumerism and easier access to credit. During FY06–13, credit off-take expanded at a CAGR of 22.8 per cent (in INR terms) to US$ 991 billion. Deposits grew at a CAGR of 21.2 per cent (in INR terms) during FY06–13; in FY13 total deposits stood at US$ 1,274.3 billion.
RBI has emphasised the need to focus on spreading the reach of banking services to the unbanked population of India. Thus, banks in the country are expanding their branch networks in the rural areas to capture the new business opportunity. Also, the increasingly dynamic business scenario and financial sophistication has increased the need for customised exotic financial products, and banks are developing innovative financial products and advanced risk management methods to capture the market share.
The real annual disposable household income in rural India is forecasted to grow at CAGR of 3.6 per cent over the next 15 years. Also, the Indian agriculture, forestry and fishing sector has grown at a fast pace, clocking a CAGR of 14.2 per cent over the past seven years. These factors are expected to enhance the need for banking services in rural areas and therefore drive the growth of the sector.
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